It wasn’t long ago that payday loans were considered the last resort for people who fell on hard times. Today, they’re often the first option we turn to when we need money quickly or can’t make ends meet. Unfortunately, some people quickly find themselves in a vicious cycle of taking out loans and defaulting on them – a downward spiral that leads nowhere good.
3 Easy Steps to Avoid Defaulting on Payday Loans
Bankruptcy is a serious issue that many people find themselves in, but it can also be prevented. There are three easy steps to avoid defaulting on payday loans. First, make sure your income is sufficient for your expenses by doing a realistic budget. Second, contact the payday loan company and tell them you will be able to pay them back in full. Finally, pay off your debt promptly so you don’t owe any interest.
Defaulting on payday loans has become a trend. Payday loans are more like debt, as they are not meant to be used on an ongoing basis, but rather just when you really need them. There’s nothing wrong with taking out one or two, but you can easily end up in a cycle of default if you’re not careful. Here are the three steps I recommend to avoid defaulting on payday loans:
What is the Number One Reason for Debt?
There are many reasons why people default on their loans. The number one reason is that they can’t pay the debt because they stopped working to control the cost of living. If you’re employed and have a stable income, you may be able to make your loan payments without any problems. However, if you’ve lost your job or had a significant drop in income, it might be time for some changes.
Many people consider themselves “good” with money and/or credit. If you haven’t already, it’s about time to check yourself. Since the average American is carrying some type of debt, it pays to know how to avoid bad debt from happening in the first place. The three steps below are designed to help you understand your personal financial situation and find ways to make it better.
Why You Should Use a Debt Management Plan
Most people who have payday loans default within the first year. In fact, 69% of people who make a single payment on a payday loan default within the first six months. But there is a solution to this problem: debt management plans (DMPs). A DMP may be implemented as part of a bankruptcy or personal financial restructuring plan offered by your bank or credit union. The idea behind the DMP is to create and follow an affordable budget that is easy to maintain by shifting your spending habits to better manage your finances in the long-term.
Sometimes, people find themselves in situations where they do not have enough money to meet their loan payments on their payday, which are due the following day. Defaulting on these loans can cause financial problems and negatively impact your credit scores. To avoid this from happening, you should use a debt management plan that will allow you to make minimum payment options on your loan with no interest or fees attached.
Defaulting on payday loans can be a costly mistake. However, following these three steps can help to avoid this problem. First, make sure that you are aware of the monthly payments for your loans. If you fail to plan ahead and know how much you will owe each month, defaulting on a payday loan can cost an average of $639 per month. Second, always pay off the full amount of your loan when it is due. Not only does it save you money in the long run, but it also keeps up your positive credit score. Lastly, prioritize payments if necessary. This means making one payment every two weeks instead of making multiple payments throughout the month
If you’ve been struggling to get ahead financially, you may have thought about borrowing. But before you do, make sure you understand what it means and the risks that come with it. This blog discusses three easy steps to help you avoid defaulting on a payday loan.